Corporate directors and senior executives should regularly communicate with major shareholders to help monitor others buying its stock, according to recommendations made in a final report released today by the Conference Boards working group on hedge fund activism.
If a hedge fund is engaged in securities accumulations or other trading activities, no one better than its peers are likely to know about it, especially if they also already own securities of the company, Matteo Tonello, research director, said in a statement about the report, which addressed abusive proxy-voting practices and other issues. Mr. Tonello wrote the final report.
A way to discourage empty voting is to create the conditions for institutional lenders to become aware of the items being put to a vote and, if they deem any of them of importance, recall their (lent) shares before the record date, the statement said.
Among other recommendations, companies should consider employing a securities surveillance service to obtain information unavailable from public filings to help monitor disguised accumulations of stock by hedge funds.
Some hedge funds may try to disguise their accumulations by taking the position that not all transactions they enter into are subject to public disclosure, Mr. Tonello said in the statement.
Corporate management should actively monitor trading in the companys securities holdings and pay particular attention to large accumulations and extraordinary stock purchase patterns, the statement said. Relations among institutional investors and group voting arrangements should also be investigated to determine whether holders are acting alone or in concert with others.