Billionaire Carl Icahn has made his money mainly through going activist on many companies, so when he talks about the subject, one can’t find a better authority on the subject. Recently, Icahn has become a contributor for Yahoo! Finance by penning down his thoughts on Yahoo! Finance’s Tumblr page. In his post, Icahn touched different subjects from what’s dragging corporate America down to the essence of investor activism to the performance of Icahn Enterprises LP (NASDAQ:IEP). Needless to say, every word written by Icahn is a testimony of his years of experience as one of the most successful activist investors.
First, Icahn highlighted all the economy-related problems the U.S. is facing right now from unemployment to monetary policy to income inequality. He even states that we are possibly in an asset bubble and that most of the pension funds in the country are in dire situation. According to Icahn, the solution for all these problems lies in Shareholder activism.
“Our current system of corporate governance protects mediocre CEOs and boards that are mismanaging companies and this must be changed. With this system we will not meet the needs of Main Street America, nor will we be ready for when the asset bubble we have today bursts – whether it is the next one, five, ten, or 20 years,” Icahn stated.
As a proof of the solution he offered, he cited the financial performance of Icahn Enterprises LP (NASDAQ:IEP) over the years. If someone would have bought shares of Icahn Enterprises LP (NASDAQ:IEP) at the start of 2000, they would have made 21.5% annual return, compared to S&P500’s 3.8% and if they would have bought shares of Icahn Enterprises LP (NASDAQ:IEP) in April 2009, their annual return would have been an astonishing 34.3%, compared to S&P500’s 20.5%.
Icahn made an even stronger case for shareholder activism by citing the annualized return a person, who invested in 23 companies whose Boards Icahn designees joined between January 1, 2009 and June 30, 2014, would have made. If that person invested in each company on the date that Icahn’s designee joined the Board and sold on the date that Icah’s designee left the Board (or hold, in case the designee didn’t leave) that person would have made an annual return of 27%.