By Andrew Nusca
October 17, 2017

LAGUNA BEACH, Calif.—Activist investors. Corporate raiders. “Dangerous” dealmakers.

Corporate boards of directors fear people like Bill Ackman, the billionaire hedge fund manager behind Pershing Square Capital Management. But they shouldn’t, Ackman said Tuesday at the Wall Street Journal’s D.Live conference in Laguna Beach, Calif.

“What activism does is sort of a replacement for the founders,” he said. “We can help make decisions like a major owner.”

In September, Procter & Gamble CEO David Taylor described activist investor Nelson Peltz’s request for a board seat at the company “very dangerous.” That’s completely wrong, Ackman said.

“It is dangerous to not have opposing viewpoints in the boardroom,” he said, adding that most of the directors on P&G’s board are working CEOs at other companies who don’t have the time to spend on P&G. “The companies that fight the most to not have activists on the board are most in need of activism.”

(Ackman acknowledged that his firm once held shares in P&G but “felt it was too big a mountain to climb.”)

Consider ADP, Ackman said. The dominant human resources software company doesn’t let “outside viewpoints in” and technology has radically changed its business. Now that is a dangerous situation, Ackman said. (Pershing Square spent much of the last two months engaged in a battle with ADP over seats on its board; ADP responded later in a statement supplied to Fortune: “ADP’s Board of Directors fully understands the importance of adding fresh, new perspectives to the Board. ADP’s 10-person Board, which includes four directors who have joined since 2014, possesses a broad spectrum of relevant leadership, skills, and experience designed to drive Board performance and properly oversee ADP’s strategy.”)

And don’t get Ackman started on so-called supervoting share structures like those at Uber and other tech or media giants. That setup “protects you from activists and what other shareholders have to say,” he said. And that’s a mistake.

The activist investor wasn’t all doom and gloom. Ackman offered public companies advice on how to approach quarterly earnings reports.

“A lot of companies make the mistake of giving guidance to their shareholders about what their results are going to be,” Ackman said. A focus on meeting specific metrics misses greater opportunity. Take ADP, for example—the company hit its numbers quarter after quarter only to miss the next wave of innovation affecting its business. “That has caused them tens of billions of dollars and created competitors,” Ackman said.

So every company should be like Amazon, which famously keeps its customers close and its shareholders at a distance? Not quite, Ackman said. Though Amazon CEO Jeff Bezos is “one of the top two or three CEOs in the world,” that’s not his point. You get the shareholders you deserve, Ackman said. If you issue specific guidance you’ll get specific expectations. Ackman sits on the board of the Howard Hughes Corporation; that company doesn’t give guidance at all, he said.

But wouldn’t doing away with guidance put a lot of people out of work? Ackman grinned. “I don’t think it would,” he said. “I think the analysts would finally have to do something.”

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