UPDATE 1-Activist investor heavyweights form new lobbying arm

(Adds context and background)
By Michael Flaherty
NEW YORK, May 18 (Reuters) - A group of hedge funds have
formed a new lobbying arm to promote the benefits of shareholder
activism across the U.S. economy, as U.S. politicians turn up
the heat on activist investors.
The Council for Investor Rights and Corporate Accountability
(CIRCA) announced its formation on Wednesday, saying it is
committed to promoting the actions of shareholder activists, and
their positive impact on corporate governance and business
policies at publicly traded companies.
The Washington D.C.-based trade association said it is
backed by a consortium of activist firms, but does not name them
in the press release. According to a person with direct
knowledge of the matter, the group's backers are: William Ackman
of Pershing Square (NYSE:SQ), Carl Icahn, Daniel Loeb of Third Point, Paul
Singer of Elliott Associates and Barry Rosenstein of Jana
Partners.
Activist investors buy minority stakes in what they believe
are under-valued and poorly managed companies and then quickly
agitate for changes. Activists often push for overhauls in
corporate strategy, cash management, management team and board
composition - sometimes under the threat of a proxy fight if the
company does not meet their demands.
Activist investors launched a record 508 campaigns against
U.S. companies last year, according to Thomson Reuters data,
targeting names such as DuPont (NYSE:DD) DD.N , General Electric (NYSE:GE) GE.N ,
and AIG AIG.N .
The actions of certain activist hedge funds, however, has
also attracted the attention of politicians, including
Democratic presidential candidates Hilary Clinton and Bernie
Sanders.
Ackman was one of the Valeant Pharmaceuticals (NYSE:VRX) International
Inc VRX.TO officials who recently appeared in front of a
Congressional committee to address the massive price hikes
Valeant issued on some of its drugs.
Valeant, a drug company whose creation was led by activist
hedge fund ValueAct Partners, is under federal investigation for
its use of specialty pharmacy companies.
Politicians have targeted activists for being short term
investors, at the expense of longer term shareholders.
"CIRCA was founded on the widely accepted idea that a
well-functioning system of checks and balances between boards of
directors and shareholders is fundamental to long term economic
growth and U.S. prosperity," CIRCA Senior Advisor Rob
Collins said in the press release.
The page and a half announcement does not detail specific
actions the group plans to takes, but rather outlines its core
principles, which include effective engagement between boards
and investors and ensuring that regulations to not allow board
entrenchment.