OCTOBER 1983 — “If Benjamin Graham were alive today, he would approve.” So began Institutional Investor’s October 1983 story “The New Activism at Institutions.” In 1949, Graham wrote that shareholders “are a complete washout . . . they show neither intelligence nor alertness . . . they vote in sheeplike fashion for whatever management recommends.” In the early 1980s that began to change as money managers made their voices heard in many ways in boardrooms, from objecting to management decisions to voting against directors in proxy fights. These institutions, we reported, were chiefly interested in enhancing the value of existing stock holdings; they typically did not jump into investments with the idea of stirring things up. Though the ranks of these latter-day activists included so-called special situations investors, more common were corporate pension fund managers under pressure to boost returns in a lackluster market. “The first major shot in the growing conflict between institutional shareholders and corporations” was attributed to Fidelity Management & Research Co., which used its block of Penn Central shares to stop the company from buying Colt Industries in 1981. Hedge funds, which today often hog the headlines in activist situations, did not make an appearance in the article at all. Then again, Edward Lampert, the hedge fund owner of Sears, was still studying economics at Yale University.
