U.S. Markets

Activist hedge fund Engaged to give director fees to corporate employees

BOSTON (Reuters) - Activist investor Engaged Capital will donate roughly $500,000 in fees its executives would have earned for serving on public companies’ boards this year to those corporations’ employees, the hedge fund’s founder Glenn Welling told Reuters.

Traditionally corporate agitators including Engaged ask companies to do something for shareholders such as selling divisions, cutting costs, or buying back stock, to help boost the stock price.

Now Welling, who founded $1 billion Engaged eight years ago, said he wants to give rather than take as companies steel themselves for the deepest recession since the 1930s era Great Depression in the wake of the novel coronavirus outbreak.

“Our partners have asked that all remaining 2020 board fees be redirected to support those employees that are most impacted,” Welling said. The money is earmarked to help “individuals and their families struggling through this volatile period,” he said.

U.S. unemployment claims surged to 22 million in the last four weeks, wiping out a decade of job gains, as layoffs mounted in industries spanning retail to restaurants.

While Americans are meant to receive payments of $1,200 or more from the U.S. government as part of a $2 trillion relief package, economists warn there won’t be a quick recovery.

Engaged Capital executives currently serve as directors at four companies. Welling sits on the boards at food company Hain Celestial HAIN.O and technology company TiVo TIVO.O. Christopher Hetrick, Engaged's director of research, sits on furniture and electronics rental company Rent-A-Center's RCII.O board and analyst Brendan Springstubb is a director at food company SunOpta SOY.TO.

Directors’ fees can vary widely depending on the size and wealth of a company but often average around $125,000 a year.

Although Welling often pushes for companies to sell themselves, he also has a reputation for taking a constructive approach with management at the small to mid-sized American companies he targets. He often holds their stock for years.

Activists have largely moved to the sidelines as the virus has wreaked havoc on the economy and financial markets with just 16 campaigns started in March, data from investment bank Lazard showed. Many fund managers worry about the optics of agitating during the pandemic and are trying to keep a lower profile. It is not clear whether others may have made gifts to their target companies or helped in other ways.

Reporting by Svea Herbst-Bayliss; editing by Grant McCool