A Capitalist Repents: Jeff Ubben Is Out to Make Things Right


Jeff Ubben wants you to know he’s sorry.

As the founder of $16 billion activist hedge fund ValueAct Capital, Ubben embodied the boisterous capitalism that elevated shareholder returns above all else in the years after the financial crisis. He stepped down in June after two decades and launched Inclusive Capital Partners, which backs companies tackling problems ranging from environmental damage to food scarcity and affordable education.

A Capitalist Repents: Jeff Ubben Is Out to Make Things Right

From the outside, it looks like a crusade -- even more so considering California-based Ubben’s aesthetic transition, from pinstriped master of the universe to what can best be described as kite-surfer casual. And that’s fine.

“I’m on a crusade,” Ubben, 59, said in an interview at the Bloomberg Green Festival this week. “I’m late in life. I’ve got five years to fix the harm I’ve done.”

Shareholder Returns

On that journey, Ubben is reckoning with the investment philosophy that guided his success during the ValueAct years, especially the relentless focus on shareholder primacy. Company owners now have too much power, he said.

“We thought we would go on boards and make companies more financially healthy, and we would get an idiosyncratic return for that. That is what we did, and to a certain extent we caused the harm,” he said. “We ourselves, I think, built unsustainable companies by maximizing profit.”

In his role as chief investment officer and then chairman of ValueAct, Ubben bought stakes in some of world’s best-known companies including Microsoft Corp., 21st Century Fox Inc., Halliburton Co. and Rolls-Royce Holdings Plc. The campaigns under his watch were usually discreet affairs lacking the pantomime confrontation of corporate provocateurs like Bill Ackman and Dan Loeb. He carved out a reputation as the nice-guy activist: a thoughtful, long-term investor who would work with -- rather than against -- the companies his firm targeted.

It’s a distinction that, today, Ubben says was mostly false.

“We had plenty of business plans built on buying companies and firing the workforce of the acquired company, and then buying the next one,” he said.

Personal Atonement

Ubben, who’s been in 15 boardrooms during his career, worries that company directors spend too much time on questions like whether they should raise prices.

“We focus on a few things like involuntary attrition -- as if that means anything -- but the health of the customer, the health workforce, and definitely the health of the planet never comes up,” he said. “In 20 years, it’s never come up in any board meeting I’ve ever been in. So that’s interesting, isn’t it? I’m sitting there complicit in that, by the way.”

Ubben’s new venture is not only one of personal atonement. He believes the same dislocation between valuation and opportunity exists today as it did at the start of his investing career. Shareholder-first capitalism has, he says, made businesses so good at maximizing profit that there is little left to squeeze. It has also left many of them ill-equipped to react to other issues investors care about.

“We’ve moved into this new era where stock prices are reflecting environmental and social failings increasingly, even as the financial returns are OK,” he said.

Ubben is a top shareholder and board member at electric-vehicle maker Nikola Corp., which he has been defending against its critics. An early investor in Nikola, Ubben has said he regrets pushing the startup and its outspoken founder, Trevor Milton, to go public before it was ready.

Novel Approach

An uncharitable reading would be that Ubben, as a former activist who pushed companies to revere only profit, is positioning himself to reap the gains of the dysfunction he helped create. For Ubben, though, there’s a better prize than just creating a financially successful investment firm focused on environmental, social and governance goals.

Indeed, he’s contemptuous of the ESG world’s self-congratulatory tone. Ubben argues much of it is corporate spin, which “may be a great way to grow your asset management business” but will do little to improve the world. Instead, he wants to help those companies that are “deep in the problem” become part of the solution.

His approach is novel. Take big energy as an example: Ubben hopes that by partnering, as investor or board member, he can help oil majors resist shareholder pressure to behave like, well, oil majors.

“Currently if you’re talking to your investors and you’re a big oil CEO, you’re basically bullied into share repurchase,” he said. “So I go in there and I say, listen, don’t do that. Let’s go find the long-term shareholders who want to invest in companies that are fixing the problem because you have the technology and the workforce to do so. We can earn our new shareholders.”

His role in creating the paradigm of excessive shareholder power perhaps makes Ubben well-placed to dismantle it too. The investor, who for years advocated linking executive compensation to share performance, now envisions a future where bosses are paid based on “total societal impact.”

“I’m trying to fix the harm I’ve done to a certain extent,” he said.

©2020 Bloomberg L.P.

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