Dear Chairman | Jefferson Gramm

Summary of: Dear Chairman: Boardroom Battles and the Rise of Shareholder Activism
By: Jefferson Gramm


Get ready to dive into the thrilling world of shareholder activism through the book ‘Dear Chairman: Boardroom Battles and the Rise of Shareholder Activism’ by hedge fund manager and professor, Jeff Gramm. This fascinating summary not only shares gripping boardroom battle stories but also sheds light on significant landmarks in the evolution of shareholders’ rights. Through innovative use of letters written by aggrieved investors to company executives, Gramm highlights the strategies, successes, and at times, unintended consequences of their engagements. You will embark on an insightful journey encompassing professional investor Benjamin Graham, proxyteers from the 1950s, the deal decade of the 1980s, and more. All the while, examining the ever-changing landscape of shareholder activism and its impact on established corporations.

Shareholders’ Activism

Jeff Gramm’s “Dear Chairman” recounts corporate battles through powerful investors’ letters, highlighting how activists brought about desired changes but sometimes with unintended consequences. The book provides key history lessons on shareholders’ rights evolution and offers lucid observations on investors and corporations. Esteemed publications like The Wall Street Journal and The New Yorker have lauded the book as an engaging and informative read on the great agency-problem battles in American business history. Gramm’s innovative approach of using investors’ letters makes for a compelling and unique read that sheds light on the power of shareholders’ activism.

Investing Pioneers

The book introduces Benjamin Graham, a renowned investor who discovered in 1926 that Northern Pipeline Company withheld millions from shareholders. Graham suggested a restorative payment to shareholders, but the management refused. He bought enough shares to win two board seats in an unprecedented victory for shareholders. The book highlights Graham’s contribution to the hedge fund and reveals his investment strategies and tactics. It emphasizes the importance of valuing companies more than their operating businesses and the need to prioritize shareholder value. This summary highlights the significance of investing pioneers like Benjamin Graham in shaping modern investment practices.

Proxyteers: Corporate Saboteurs

In “Proxyteers,” Gramm exposes how raiders in the 1950s targeted under-performing corporations such as Twentieth Century Fox and Montgomery Ward. By taking on proxy votes, proxyteer Robert Young was able to lead the successful takeover of the New York Central Railroad. Despite the company doubling in value, Young eventually took his own life, leaving behind a vast fortune. Gramm’s book serves as an eye-opener about the cutthroat world of corporate raiders and the high stakes involved in such power plays.

The Scam that Changed Warren Buffett’s Investment Strategy

Gramm’s book reveals a 1960 scam at Allied Crude Vegetable Oil Refining Corporation, which caused American Express’s value to drop by 50%. Shareholder activism was rare in the early 20th century because ownership at public companies was concentrated into very few hands. Warren Buffet invested heavily in American Express and praised CEO Howard Clark in a 1964 letter. The scandal changed Buffett’s investment strategy, leading him to buy companies rather than stock.

The Deal Decade

In the 1980s, the world witnessed an unprecedented number of mergers and acquisitions, earning the decade its moniker as “the deal decade.” This was made possible by the increasing popularity of junk bonds, which provided enormous liquidity for the financial market. However, the infamous case of Michael Milken, the junk bond prodigy, showed that success comes with a dark side, as Milken was eventually incarcerated. Carl Icahn, backed by Milken’s $1.5 billion, took over Phillips Petroleum and became immensely wealthy. This illustrates the dichotomy between the virtues and vices of the deal-making frenzy that characterized the 80s.

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