Tag Archives: Cabela’s

Social Responsibility vs. Activist Investing

October 3, 2017 by
Illustration by Derek Joy

Activist investing. What is it? Who does it? Is it effective? Does it work?

As with anything, the answer to most of these questions is situational. According to the qz.com article “The 10 activist investors you should know,” whether activist investors are good or bad for companies and shareholders is a debate for the ages: “Are they short-term bettors who cause drama and then get out of a stock as soon as shares see a pop? Or are they constructive critics who add value, partly by pushing executives and boards to do things they are too complacent to do otherwise?”

A shareholder activist is a person who attempts to use his or her rights as a shareholder of a publicly-traded corporation to bring about change, according to investopedia.com. Issues addressed by activist investors, hypothetically, might focus on the environment, sweatshops, investment in politically “sensitive” parts of the world, and other issues surrounding worker and animal rights. However, the term “activist investor“ generally refers to institutional investors wishing to maximize their own profits (often in the short term). For example, Cabela’s sale to Bass Pro Shops was a deal pushed by New York hedge fund Elliott Management. In October 2016, after the sale was confirmed, Elliott Management was cashing out its 6 million shares for an expected $90 million in profit. The effect of this move on the employees residing in, and the community of, Sidney, Nebraska, was not the hedge fund’s concern.

According to Dr. Ernie Goss, who holds the MacAllister Chair in Economics at the department of economics and finance at Creighton University, “An activist investor is a person who owns enough shares to bring some issues before the board and force some changes on the board or in company operations…As an economist, I would have some issues with activist investors who take positions that are contrary to the overall, which is long-term shareholder value. In other words the goal of a corporation is long-term stakeholder and shareholder value.”

It is bad business, Goss says, to ignore community and employee stakeholders because one does not maximize shareholder value. “There’s a reason that ConAgra and Union Pacific and Mutual of Omaha give money to nonprofits, and that’s to maximize shareholder value,” Goss says. “In the short run, it reduces shareholder value, but in the long run it does contribute to shareholder value. So the goal of the board of directors and the management of a corporation is to maximize long-term shareholder value and stakeholder value as well. Other stakeholders that aren’t shareholders include the community, the employees, of course, and the environment.”

Union Pacific and ConAgra’s community philanthropy reflects a trend for corporate social responsibility.

An interesting example of activist investing, which advances a social or cultural activist agenda, occurred in March 2017 when the animal rights group People for the Ethical Treatment of Animals became a shareholder in the clothing company Canada Goose. According to PETA’s executive vice president Tracy Reiman, “PETA became a shareholder in Canada Goose in order to pressure the company from the inside to stop using cruelly-obtained coyote fur and down. Coyotes trapped in the wild can suffer for days before being shot, stomped on, or bludgeoned to death, and geese used to stuff Canada Goose jackets are violently killed for both their feathers and flesh—and the throats of many are slit while they’re still conscious and able to feel pain.” While it may seem quite a leap from storefront demonstrations at Canada Goose locations to the boardroom, PETA plans to use basically the same strategy used by Elliott Management (in the sale of Cabela’s to Bass Pro) to push the company in a “cruelty-free” direction.

Activist investing is an interesting tactic and one which has as much chance of succeeding as any other corporate takeover, with certain caveats. Activist investors, regardless of their intention, still need to maintain shareholder value in order to further their goals. In other words, for PETA to “be the change it wants to see in the world,” it still needs to behave in the best interest of its shareholders and stakeholders. Otherwise, according to Goss: “What would happen would be contrary to the goals of the corporation and to PETA, because ultimately that’s not good for shareholder value and ultimately that corporation is going to have less and less influence because they’re pursuing goals that might be contrary to the overall long-term goal, which is shareholder value. Because ultimately if the stock price keeps coming down, then PETA owns shares that are coming down in value.”

PETA could inadvertently be self-defeating while successfully achieving their primary goal of ending the use of animals in Canada Goose products, as insistent consumers might simply go elsewhere for goose down and wild coyote fur parkas. It’s a delicate balancing act.

Regardless of its efficacy as an investment strategy, many investors don’t like to call themselves “activist,“ according to cfo.com, because activist investing is just one style among many, and while growing in popularity, less than 10 percent of 8,800 hedge funds worldwide were activist.

Visit elliottmgmt.com or peta.org for more information about the shareholder activitsts discussed in this article.

This article published in the Fall 2017 edition of B2B.

Sarpy, Sarpy, Sarpy!

March 15, 2016 by
Photography by Bill Sitzmann

In 1999, an online-banking company with a nonsensical name built a sprawling operation center next to the I-80 corridor on the edge of Papillion. Baffled passing commuters wondered how long a company named “PayPal” could possibly survive.

Six years later—to the delight of the region’s outdoor enthusiasts—Cabela’s opened a 128,000-square-foot sportsmen’s paradise that transformed the Cornhusker Street exit along I-80 into a bustling retail hotspot.

As the companies moved into the area, so did the employees, and the shoppers. Once boasting only sleepy rural charms, quaint main streets, and Offutt Air Force Base mystique, Nebraska’s smallest county by land mass is now also its fastest growing.

Indeed, while the rest of the state lost 3% of its population (or 55,000 people) between 2010 and 2014, Sarpy County added 13,000 people—an 8% increase.

How did it happen? Is there something to be learned by Nebraska’s other 92 counties?

Sarpy’s formula was a mix of nature and nurture: Aggressive leaders with vision and a willingness to deal. The good fortune of having open land next to a major metropolitan area and one of the nation’s major east-west corridors. Lots of nearby suburbanites with cash. Also, an educated work force within driving distance.

Baseball-Field

It was a perfect economic storm that even pulled off the outrageous and unthinkable: Dragging the Omaha Royals into the suburban Sarpy playground of the Omaha Stormchasers.

And now, in 2016, it’s all about synergy. Momentum. Winning begets more winning.

Ernie Goss, a Creighton University professor of economics, says that when county leaders are successful in building a concentration of development like the one in Sarpy County, it becomes a catalyst for more growth.

“There’s the impact of what we call clustering, Goss says.

The perpetual motion machine is paying off for the county and state. PayPal alone generated $736,930.00 in tax revenue in 2014, more than any other commercial business in the region.

Goss says the presence of PayPal and Cabela’s, among others, has undoubtedly propelled more development. After all, people want to be where the jobs and rooftops are.

There’s a lot to be said for clustering and that’s what we’re seeing out there,” he says.

Embassy Suites Conference Center in La Vista, developed in 2004, has brought in tourism dollars from conventions and weddings. Those tourism dollars also mean more people viewing the city, which builds awareness of the hotel and convention center, which, of course, increases chances that people will spread the word to other shoppers and convention organizers.

Goss says the boom will continue as long as the benefits of providing essential services—such as sewers and roads—in support of new development exceeds the marginal costs. Once those infrastructure elements are in place, he says, the marginal costs tend to decrease and that, in turn, spurs more development.

“It’s the initial development that’s very costly in providing things like fire and police services and other government services.”

Typically, he says, providing services becomes cheaper as the area grows more densely populated. That’s what’s happening in Sarpy County, where a growing resident and business tax base is helping make development cost effective.

The area also benefits from ready access to interstate highways that feed into the Omaha-Lincoln metroplex. Goss says Sarpy is situated just enough outside the urban congestion sprawl to give it a semi-country, away-from-it-all appeal while being near enough to still share in the big city orbit.

Holy-Family-Shrine

“It has a lot to do with interstate access,” he says.

And convenience.

“A lot of folks out west of Omaha find it easier driving to a conference at the Embassy Suites in La Vista than having to drive to the Embassy Suites in the Old Market,” Goss says. “That’s certainly part of it.”

All this growth, too, has come amid a national economy that has generally lagged. But, as the economy sputters, interest rates remain low. In the environment of the last decade, the cost and major development has remained lower as interest rates continue to hover around 4%.

The surge is not slowing.

La Vista anticipates yet another spike once the Nebraska Multisport Complex is built on 184 acres to encompass a natatorium with Olympic regulation pools, an indoor-outdoor tennis center, and soccer fields with field turf and lighting. The facilities will be available to local teams, clubs, schools, and nonprofits. Hosting regional-national tournaments is a massive money generator as families follow players for long weekends of play. Projections estimate the complex would generate $17.8 million in new economic impact and attracting 1.2 million visitors annually.

The win streak extended down the road to the edge of Gretna, where the massive Nebraska Crossing Outlets defied the doubters by doing $140 million in sales in its first year of operation. Within a year of its 2013 opening, the $112 million, 335,000-square-foot mall featuring buzz-worthy brand name stores was planning a major expansion. A new $15 million complex of stores is scheduled to open by Christmas.

Karen Gibler, president of the Sarpy County Chamber of Commerce, says there soon will be announcements about coming neighborhoods and businesses spurred by the new Highway 34 bridge, 84th Street developments, new I-80 exits, and planned sewer and transportation projects.

Gibler cites many reasons why investors and residents choose to work and live there:

“Quality of education and life keeps residents looking to move into our area,” she says. “This growth has opened the eyes of developers. Our leadership in the cities and county are a contributing factor. Land availability and easy access to good highways and the interstate make it easy to access from around the area.” Smart planning helps, as do plentiful jobs and affordable home prices. And people feel safe.”

That success has brought recognition. Papillion now ranks second on Money Magazine’s Best Places to Live for its high median income ($75,000), job growth (10%), thriving cultural life, and great access to the big-city amenities of Omaha.

National awards show up in national magazines and websites. People and companies looking for good homes read about this happenin’ place called Sarpy County in Nebraska.

And so, the wheels of progress keep on turning.

Once you can get it going, Goss says, “one activity draws another activity or one company draws another company.

“They have it all going in the right direction right now,” Goss says.

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