Friday, April 20, 2012

Sequoia Fund Stands Tall For Better Governance

Investor activism has been all the rage for some time now, and it has been synonymous with hedge funds or with individual investors like Boone Pickens and others.  We've written about Sequoia Fund before; the late Bill Ruane, a founder of Ruane, Cunniff and Goldfarb, Inc., was a student of Ben Graham and consistently applied those value-oriented principles to a successful investment process that continues unchanged today.

 Now, the Sequoia Fund co-managers Rob Goldfarb and Dave Poppe have addressed a letter to their clients outlining in a measured but foreceful way the reasons for Sequoia casting its discretionary votes at the fund and in separately managed accounts, against the re-election of James A. Johnson as a Director of Goldman Sachs and as chairman of the compensation committee.  The managers don't have a quarrel with the corporate strategy or operating management of Goldman's businesss, which Sequoia clearly finds attractive.  They do, however, clearly make a case against having this particular individual as a director at their portfolio firm. The letter is great reading.

Sequoia is a long term shareholder by every measure.  For them to go public in this way is unusual, as most mutual fund managers routinely vote across the board for management proposals.  Now, for all the whining and complaining about the need for better corporate governance, we shall see how many other fund managers are willing to think hard and act as fiduciaries by voting for directors who bring high standards of competence, integrity and character to their roles.  Congratulations to Sequoia for standing tall.

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