Zapf & Co: The latest lessons from the history of the robbers

Lehren aus der Räuber-Geschichte

You remember Klaus Zapf? The quirky removal company, who died in 2014, kept Germany’s stock corporations on the go for years. Many considered him to be the epitome of a “predatory shareholder” – the species, in other words, that species which blocked AGM resolutions with actions for rescission in order to force companies to make expensive settlements. At peak times, stock corporation lawyer Theodor Baums identified more than 40 so-called professional plaintiffs, among whom he counted not only Zapf but also other illustrious investors such as Karl-Walter Freitag and Frank Scheunert. But after several reforms, the business model no longer works: the legislator has managed to thwart professional plaintiffs without curtailing the rights of small shareholders. We are now facing a similar challenge again.

Influence instead of Blockade – What Activists Do Differently

This time it’s about activist investors like Paul Singer (Elliott), who don’t block decisions – but aggressively try to influence them. And we are convinced that they too often act only superficially in the interests of all shareholders. After all, share buybacks and higher dividends are good for everyone in the short term (in the form of price gains or cash flow). But they sometimes reduce the long-term opportunities, as they are at the expense of future investments. But by the time the price goes down, the activists are long gone – while company shareholders, private investors and other long-term shareholders have to foot the bill. We must therefore finally oppose activists more and have already made a proposal to this effect. In any case, the victory against the professional plaintiffs impressively demonstrates that we can stop aggressive shareholders without restricting ownership rights. That gives hope.