July 21, 2002
Another Dimension of Shareholder Activism
By ROBERT D.
HERSHEY JR.
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a time when some companies report money that isn't there, can other
companies have too much hard cash?
Last week, the Securities and Exchange Commission filed suit against
National Presto Industries, arguing that the maker of kitchen
gadgets is primarily an investment company and should be regulated as
such for the benefit of stockholders. The company has a $195.8 million
surplus stash, or 72 percent of total assets.
Another cash-heavy company is Farmer Brothers, a family-controlled
California coffee company with a cash hoard of $282 million, or 70
percent of assets. Franklin Mutual Advisers, a group with a 9.7 percent
stake, is leading an effort to force Farmer Brothers to unlock value.
These cases are part of a trend of stepped-up shareholder activism at
a time of intense scrutiny of corporate America. Gary Lutin, an
investment banker in New York who has been urging National Presto and
Farmer Brothers to treat themselves as investment companies, argues that
some new mechanism is needed for shareholders to communicate with one
another and with management.
"The annual stockholder meeting is no longer functional" as a means
of monitoring performance, he said. He is using what he calls forums to
allow discussion among company owners, a type of activity encouraged by
the S.E.C. These involve Web sites (his is www.shareholderforum.com),
letters and face-to-face gatherings.
"Investors shouldn't rely only on accountants and regulators," he
said. "They have to take responsibility themselves."
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Copyright 2002 The New
York Times Company
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