Tejon Ranch Co. is one of California’s oldest — one might almost say “antique” — corporations. What has become a landholding of 270,000 acres, situated in the largely-undeveloped territory between Los Angeles and Bakersfield, was first assembled in 1855, the company was incorporated in 1936 and it went public in 1973.
Frank Partnoy and Steven Davidoff Solomon teach about shareholder activism as law professors — Partnoy at the University of San Diego, Solomon at UC Berkeley. They thought Tejon Ranch would be an ideal subject for a real-life experiment: What would happen if they bought up Tejon stock themselves, then tried to jawbone its executives into taking steps to improve shareholder value, as though they were the kind of activist corporate raiders who make managements of big companies quake with fear?
Here’s a spoiler: It didn’t go well.
Tejon management made a show of listening to their proposals, then essentially blew them off. Having risked a significant share of their retirement nest eggs by assembling a combined stake of about $500,000, they escaped after about a year and a half with a modest gain of $55,000. But Tejon hasn’t really changed.
“There are thousands of companies that have never had an activist investor darken their door,” Partnoy told me. “One of the reasons is that it’s really hard. We wanted to see if we could succeed. But even with our knowledge and our connections and our expertise, we did not succeed in any meaningful way.”
What they did get out of it was a great yarn, rife with insights into the resistance of corporate managements and boards to outsiders trying to shake them out of strategic stupor. They laid out the lessons in a highly entertaining article in the latest issue of The Atlantic, entitled “Frank and Steven’s Excellent Corporate-Raiding Adventure.”
Tejon wouldn’t comment directly on their article. “It’s our policy not to comment on specific conversations we’ve had with shareholders,” investor relations executive Barry Zoeller said by email — a bit strange, since these shareholders had disclosed those conversations in a national publication.
Neither professor came to this quest as a “Mr. Smith” novice. Solomon spent a decade in practice as a corporate attorney and writes a weekly column on corporate issue for the New York Times, and Partnoy worked in Morgan Stanley’s derivatives shop during the 1990s and has written several books about financial corruption.
As they describe in the article, they decided one day in 2014: “Let’s get out of the ivory tower and try actually being activists. How hard can it be?”
They settled on Tejon Ranch as a target because it seemed to…