Sam Wyly, the Texas millionaire who recently lost an expensive proxy fight against the management of Computer Associates International, Islandia, New York, thinks he knows why some large investors supported his cause, while others didn't.
"I'm an owner. Part of the learning process of institutional investors is to see who thinks most like an owner," he said. He said executives at public pension funds such as the $151 billion California Public Employees' Retirement System, Sacramento, which suppported his proxy fight, "think like real owners."
But the giant mutual fund companies such as Fidelity Investments, Boston, which voted with CA management, don't think that way.
According to Mr. Wyly, the mutual fund companies won't support a proxy fight against entrenched management because "they have to get 401(k)-type money from the CEOs of the company."
He goes so far as to say "it corrupts them." Because the large mutual fund companies manage 401(k) money for many corporations, they are afraid to anger company management by voting the shares they own in the company against management during a proxy fight.
"The public funds are not beholden to anyone," said Mr. Wyly.
Mr. Wyly said he is not beholden to anyone either, and he plans to wage more proxy fights against companies with bad management through Ranger Capital Group, his $300 million, family-controlled hedge fund.
He said he waged the proxy fight against CA as a "pro bono activity - a public service" for other investors in the company.
"We learned a lot. We could do it again for less money (the CA proxy fight cost him $10 million) and more effectively," he added.
He insisted he would prefer to get company management to make changes by talking to them privately, "without the public debate," because "that takes time and energy." Mr. Wyly said he is not looking to get into proxy fights with corporate management "just for the joy of it. These proxy fights are expensive."