Here’s an interesting idea. With their vast holdings of listed and unlisted businesses, should family offices play a more activist role in improving corporate governance? Some feel they should and are doing so - their actions might start a trend of greater family-office activism.
Last week, Wildcat Capital Management, the family office of David Bonderman, the founding partner of the private equity firm TPG Capital, sent a letter to the board of directors of Sorrento Therapeutics demanding corporate governance reforms.
Here’s a snapshot of what the Wildcat letter said to Sorrento’s board of directors: “In particular, the letter calls for the board to immediately terminate and replace Dr Henry Ji as CEO and to stop recently announced financing transactions to avoid further dilution to the existing shareholders. The letter also calls for the appointment of three Wildcat nominees to the board to lead a special committee authorized to initiate a sales process for the company.”
A pretty clear message from Wildcat, which managers around $1.79 billion for Bonderman and his family, then. And the letter went in on in a similar vain. Wildcat owns 2.5 million shares, or 6.5%, of Sorrento, and is no doubt worried about the value of its shareholding, because the biotech company’s share price has plunged 75% since July last year.
Wildcat isn’t the first family office to make its complaints about poor corporate governance public. Last year, Cascade Investment, the family office of Bill and Melinda Gates, moved to block members of the founding Burkard family from selling their stake in the Swiss chemical group to competitor Saint-Gobain. The battle for control of Sika has become increasingly bitter, involving a number of lawsuits, and has yet to be resolved. But independent investors like Cascade have made it clear they will stick to their principles.
These are just two publicly available examples of family office activism in the companies they hold. But such activism among family offices is likely to be going on much more behind the scenes. Family offices like their privacy, so most would like their activism to be private as well. Nevertheless, as pension funds and mutual funds are upping their efforts to improve corporate governance, family offices are expected to make more public announcements like that of Wildcat and Cascade in the future. This can only be a good thing.