Eastern Railroad Discussion > Is a share owner a "bully"

Barron's editor Beverly Goodman notes that many large fund managers are beginning to become "activists" in companies where they own significant amounts of stock.  Many large rail companies are in indices like the S&P 500, the Dow Jones Transportation Average, etc, so mutual fund managers are expected to own lots of their stock.    She notes that these investment managers don't want to be called activists (like Pershing Square, Mantle Ridge, etc) but they do want long term improvements in their companies. In this context, I'm using mutual fund managers and investment managers interchangeably, but there are differences.

Goodman says these fund managers, who run money for pension plans, IRAs, 401k etc programs, are engaging company management quietly. Not confronting, or issuing proxy challenges, etc.  Seeking to improve companies they own.

Well, it doesn't seem like these quiet approaches did much good at CSX. The company did make modest changes under Mike Ward, but wasn't impressive.  When Mantle Ridge came along, the big fund managers, who owned about 75% of the shares outstanding, caved pretty fast.  Only Vanguard stood up, and not for very long, as the price of shares rose. And rose some more. They gave Hunter Harrison the keys to the shop, and he sharpened his ax.

For the record, the shares continue to trade at about double the pre-EHH price.

In this context, that's what I thought the term "activist" meant! Be a bully and have a politically correct term for it... JG

Indeed the shares trade very high, but are we kiliing the goose that lays the golden eggs?

In a post above, it is stated that NS now only runs 5 mixed freight trains on the Reading Line, not counting locals. NS has stated it wants to grow. However, how much growth is needed to add a train? If new traffic is too much for existing trains, but not enough to add an additional train on a particular line, does NS get rid of the new traffic (or lower yielding current business) via high rates, etc to make the business fit the existing train schedules? CSXT did this in some circumstances.

It concerns me, as PSR is a program to make the business fit the business model, rather than making the business model fit the current and future business levels.

PSR = Pretty Stupid Railroading