This is part of a series of stories that comprise TheStreet's Blue Chip Studio, which will illuminate issues related to corporate board performance, activism, dealmakers and personalities revealed by analysis of data generated by BoardEx, a business unit of TheStreet.
American International Group (AIG) , the giant insurance company, SunOpta (STKL) , a multinational food and minerals business, and drug company DepoMed (DEPO) have all made moves to cut the average age of their board membership by installing directors in their 30s over the last year.
Not coincidentally, the new directors are not only by far the youngest on their respective boards, but they also work for the activist fund managers who helped put them there.
DepoMed tapped Starboard Value's Gavin Molinelli, 33, for its board in March. Brendan Springstubb, 33, a principal at activist fund Engaged Capital, got a board seat at SunOpta in October. And Samuel Merksamer, 37, a former manager with billionaire raider-turned-activist Carl Icahn, became a director last May at AIG as part of a settlement deal.
They are part of a trend of young managers at activist funds getting brought on corporate boards, either in director-election battles or collaborative settlement agreements.
"The principals [at activist funds] tend to be young and the people who work for them tend to be even younger," said Joe Mills, founding partner at solicitor Saratoga Proxy Consulting in New York. Mills said he's not surprised that activist portfolio managers are often the youngest directors on corporate boards.
A study of the top 14 activist funds produced by relationship mapping service BoardEx, a service of TheStreet, reveals that the youngest board nominees put up by activists are almost always their own internal managers. Overall, BoardEx shows, the ages of director candidates put up by activists vary widely. However, older candidates are typically outside experts, including ex-C-suite officials, activists find to complement their insider director nominees.
Activist funds nominated 107 director candidates between 2016 and 2017 so far and the nominees' ages ranged from 32 to 74, with most candidates and directors in their 40s, 50s and 60s, according to BoardEx. However, a review of the data also showed that the youngest director nominees, like Springstubb, emerged from the activist funds themselves. A similar look by BoardEx at the same fund managers over a longer time frame revealed the same trend. Over the past few years, activists nominated hundreds of director candidates, with the youngest typically being employed at insurgent funds.
At SunOpta, Engaged's Springstubb was installed along with two other directors as part of a settlement that also included an $85 million investment infusion from asset manager Oaktree Capital. As part of the deal, SunOpta also brought on Albert Bolles, 59, an ex-executive at ConAgra Foods and Dean Hollis, an Oaktree adviser and chairman of AdvancePierre Foods Holdings Inc.
Springstubb said he was brought on in a "very collaborative situation" -- and that today he brings a different but necessary shareholder-focused point of view to the boardroom. That expertise includes knowledge about CEO pay matters, investor communications and capital allocation issues that other board members don't usually bring to the table.
"The typical director doesn't read too many proxy statements, while an analyst at an activist fund reads hundreds of proxy statements and the associated executive compensation disclosures, so when we speak on those topics we have a degree of expertise that other directors may not have," he said.
Nevertheless, Springstubb is between 20 and almost 30 years younger than the other SunOpta directors, who range in ages from 53 to 61.
Mills, who advises both companies and activists, points out that an insurgent portfolio manager who finds himself with a seat on a corporate board is often the one that generated the fund's strategy with that investment. "He's the guy that follows a particular investment for a fund," Mills said.
One activist manager at a major fund that requested anonymity noted that the investment firm he works for makes allocation decisions collaboratively. However, he added that there is one manager, usually a younger principal like himself, who subsequently does the "heavy lifting" of following the stock and producing primary internal research for it. It is that person, he said, who usually gets a board seat down the road if the two sides can agree.
And boardroom meetings involving young activists board members and older directors can be interesting. "Having an activist director on a board who is much younger may be awkward at times," Mills said. "I was in a board dinner once where there was a twenty-something activist-backed director participating who had barely begun shaving."
In many cases, younger analysts at fund never make it on corporate boards. Thirty-something dissident nominees can face criticism over their age and lack of experience, especially when the two sides are locked in heated boardroom battles. For example, Springstubb had a less-than-enthusiastic reception from Benchmark Electronics (BHE) when he was put up as a candidate on a slate of dissident nominees for the board. The electronics company focused on Springstubb's age, arguing that he had "no relevant industry, operating or management experience" and was "not qualified to be" a public company director. Engaged succeeded at getting two directors onto Benchmark's board, not including Springstubb, and the fund ultimately succeeded at driving the company into making some of share-price-improving changes.
For his part, Springstubb contends that he did have director experience of sorts, even prior to joining Engaged Capital. The activist fund manager points out that he worked with Ralph Whitworth, the godfather of activist investing, at Relational Investors between 2005 and 2013. During that time he attended many board meetings, experience that helped prepare him for getting his own board seat at SunOpta. "When Ralph was on the board of Genzyme or Sprint, the team would help him get prepared for the meeting. Occasionally I or other managers would attend meetings with him," Springstubb said.
In addition, Springstubb, like many other activists in similar situations, brings significant resources to the table in the form of a team of analysts back at the fund, who provide valuable research and background. That's in contrast to many other directors on U.S. boards who may have a wealth of experience of their own but they don't have a team providing additional help.
Beyond Springstubb, pretty much every other major activist fund has a young portfolio manager that is getting on corporate boards following an insurgency campaign.
Consider Elliott Management's tech expert and head of U.S. equity activism, Jesse Cohn, 37. The activist manager is currently on two public company boards, Citrix Systems Inc. (CTXS) and Logmeln Inc. (LOGM), and four private boards, Ark Data Centers Ltd., MSC Software Corp., SonicWall and E2open LLC, according to BoardEx. Cohn, for example, is the youngest director on Citrix's board, which otherwise ranges in ages from 56 to 67.
Merksamer, a former portfolio manager at Icahn Capital, is on five public company boards, including AIG, Hertz Global Holdings (HTZ) , Cheniere Energy (LNG) , Transocean (RIG) and Navistar International (NAV) . At AIG, for example, Merksamer was installed in a settlement between Icahn and the blockbuster insurer after the billionaire raider turned activist launched a campaign seeking to break the company into three businesses. Merksamer, no surprise here, is the youngest director on AIG's 15-person board, which recently installed a new CEO that Icahn said he supports.